Chapter 1

The Strategic Management Process

Strategic Charles W. L. Hill

Management Gareth R. Jones

An Integrated Approach

Fifth Edition
 Overview

Why do some firms succeed while others fail?

 A central objective of strategic management is to
learn why this happens.
What is strategy?
 An action a company takes to attain superior
performance.
What is the strategic management process?
 The process by which managers choose a set of
strategies for the enterprise to pursue its vision.

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 Strategic Planning
Rational planning by top management?
Basic Strategic Planning Model

Defining the Mission and Setting Top-Level Goals

External Analysis of Opportunities and Threats

Internal Analysis of Strengths and Weaknesses

Selection of Appropriate Strategies

Implementation of Chosen Strategies

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 The Main
Components of
the Strategic
Planning Process

FIGURE
1.1
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 Mission and Goals

Mission
 Sets out why the organization
exists and what it should be doing.
Major goals
 Specify what the organization hopes
to fulfill in the medium to long term.
Secondary goals
 Are objectives to be attained that lead to superior
performance.

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 External Analysis

Identify strategic opportunities and threats in

the operating environment.

Immediate (Industry)

Macroenvironment National

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 Internal Analysis

Identify strengths
 Quality and quantity of resources available
 Distinctive competencies
Identify weaknesses
 Inadequate resources
 Managerial and
organizational deficiencies

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 SWOT and Strategic Choice

Strengths and Weaknesses

Opportunities and Threats
(SWOT Analysis)

Strategic Choice
Business
Functional
Global
Corporate

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 Business-Level Strategies

Cost leadership
 Attaining, then using the lowest total cost basis as a
competitive advantage.
Differentiation
 Using product features or services to distinguish the
firm’s offerings from its competitors.
Market niche focus
 Concentrating competitively on
a specific market segment.

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 Functional-Level Strategies

Focus is on improving the effectiveness of

operations within a company.
 Manufacturing
 Marketing
 Materials management
 Research and development
 Human resources

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 Global-Level Strategies

Multidomestic
International
Global
Transnational

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 Corporate-Level Strategies

Vertical integration
Diversification
Strategic alliances
Acquisitions
New ventures
Business portfolio
restructuring

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 Strategy Implementation
Designing organizational structure
Structure
Designing control systems
 Market and output controls
 Bureaucratic controls
 Control through organizational culture
Controls
 Rewards and incentives
Matching strategy, structure,
and controls
 Congruence (fit) among strategy, Strategy
structure, and controls

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 Managing Strategic Change

The only constant is change.

Success requires adapting strategy and
structure to a changing world.
The feedback loop in
strategic planning. Corporate

Operational Business

Functional

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 Strategic Managers

General managers
 Responsible for the overall (strategic) performance
and health of the total organization.
Operations managers
 Responsible for specific business
functions or operations.

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 Strategic Managers for All Levels

FIGURE 1.2

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 Strategic Leadership

Vision, eloquence, and consistency

Commitment to the vision
Being well informed
Willingness to
delegate and empower
Astute use of power
Emotional intelligence

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 Strategy as an Emergent Process
Strategy making in an unpredictable world
 Creates the necessity for flexible strategic approaches.
Strategy making by lower-level managers
 Strategy evolves through autonomous action.
Serendipity and strategy
 Accidental discoveries and happenstances can have dramatic
effects on strategic direction.
Intended and emergent strategies
 Realized strategies are combinations of intended and
emergent strategies.

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 Intended and Emergent Strategies

FIGURE 1.3 Source: Reprinted from “Strategy Formation in an Adhocracy,”

by Henry Mintzberg and Alexandra McGugh, published in
Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by
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 The Strategic Management Process
for Intended and Emergent Strategies

FIGURE
1.4
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 Strategic Planning in Practice
Planning under uncertainty
 Scenario planning for dynamic environmental change
Ivory tower planning
 Lack of contact with operational realities
 The importance of involving operating managers
 Procedural justice in the decision-making process
 Engagement, explanation, and expectations
Planning for the present: Strategic Intent
 Recognition of the static nature of the strategic fit model
 Strategic intent in focusing the organization on winning by
achieving stretch goals

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 Improving Strategic Decision Making

Cognitive biases systematically influence the

rationality of decision makers.

FIGURE 1.5

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 Groupthink and Strategic Decisions

Pitfalls of groupthink
 Failing to question underlying assumptions.
 Coalescing around a single person or policy.
 Filtering out conflicting information.
 Developing after-the-fact rationalizations.
 Having an emotional (nonobjective)
commitment to an action.

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 Techniques for Improving Decision Making

Two decision-
making processes
that counteract
cognitive biases
and groupthink.

FIGURE
1.6
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